The recent disclosure that African countries lose $88.6 billion annually in illicit financial flows is a wake-up call on African leaders to rise against the menace. The money lost to illicit financial flows represents 3.7 per cent of the continent’s gross domestic product (GDP). The total official development assistance and foreign direct investment (FDI) for the same period stood at $48 billion and $59 billion between 2013 and 2015, respectively. According to the director-general, African Development Bank Group, Lamin Barrow, the development has created a vicious cycle of a fiscal sinking hole in Africa’s public resources. Unfortunately, Nigeria is reported to be the transit country of illicit financial flows, accounting for about 70 per cent of the total capital flight.
Speaking at an executive training programme recently in Abuja, Barrow said the situation has been worsened by lack of accountability and transparency on the continent. In its Economic Development in Africa Report 2020, the United Nations Conference on Trade and Development (UNCTAD), which corroborated the AfDB’s position, noted that one-sixth of the continent’s aggregate government revenue was derived from corporate tax, but 10 per cent of that revenue had been lost to tax avoidance. While the total illicit capital flight from Africa was $83 6billion between 2000 and 2015, Nigeria lost about $157.5 billion to illicit financial flows between 2003 and 2012. It is estimated that between 1980 and 2009, about $1.4 trillion left Africa, and the bulk allegedly came from Nigeria.
The UNCTAD report said the irony of Nigeria’s and other African countries’ situation is that while the governments lose humongous amount to illicit financial flows and corruption, they were forced to more borrowing sprees. The borrowed money may also be stolen due to weak public financial management systems. Nigeria is already in that situation. The federal government has for long embarked on borrowing spree to fund budgets and even for consumption.
No doubt, corruption and illicit financial flows will stunt development in many African countries, including Nigeria. According to the latest report from the Debt Management Office (DMO), Nigeria’s total national debt stood at N87.38 trillion($113.42 billion) in the first quarter (Q1) 2023, indicating a growth rate of 75.27 per cent on a quarter-on-quarter basis. Nigeria’s total external debt stands at N33 trillion. The federal government spends over 96 per cent of its revenue in debt servicing. This is unacceptable.
It is worrisome that funds stolen from Nigeria yearly through illicit financial flows may have provided about 60 per cent of the money needed to finance the N27.5 trillion 2024 budget. The financial drain caused by illegal capital flight has stunted the nation’s economic growth and increased the country’s poverty level. It has also hampered the achievement of Sustainable Development Goals (SDGs) and the AU’s Agenda 2063.
AU’s 2063 agenda includes inclusive growth and sustainable development, high standard of living, quality health care and well-nourished citizens, a well-educated people with skills, driven by technology and innovation, among other benefits. In 2014, the Global Financial Integrity Group disclosed that Nigeria lost a total of $140 billion to illegal financial flows between 2002 and 2011 through the banking system. Over $1 trillion was also lost through money laundering, tax evasion, over-pricing and embezzlement of government funds by corrupt politicians. In 2019, a report by the Nigeria Extractive Industries Transparency Initiative (NEITI) stated that Nigeria lost between $15 billion and $18 billion yearly to illegal capital flight.
The Central Bank of Nigeria (CBN) must tighten the loose ends in the banking system. This has become very critical since some of the illicit funds pass through the banking sector. Considering the important role of the banks in the economy, it is time to initiate a robust corporate governance system with strict guidelines to check illicit financial flows. Strict enforcement of the guidelines is key to curbing illegal financial flows. Illicit capital flight and official corruption must be tackled urgently.
Nigeria should lead in curbing illicit financial flows in Africa. The Economic and Financial Crimes Commission (EFCC) should work effectively to check illicit financial flows without government’s interference. The banking sector must play a big role in curbing financial crimes. The CBN should come up with laws to curb the rising incidence of financial crimes in the banking sector. In 2016, the websites of 15 commercial banks were hacked.
We urge the CBN to curb electronic fraud in the banks. The National Assembly should collaborate with anti-graft agencies in enacting stiffer laws against illicit financial transactions. Besides, all anti-graft agencies must be adequately funded to perform their functions effectively. No stone should be left unturned in dismantling the safe havens for corruption and illicit financial flows. Let African leaders halt the illicit financial flows stunting development on the continent.